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Portugal’s Fintech Success Story

Portugal's FinTech Success Story -
Portugal's FinTech Success Story - Portugal Business News

Portugal’s FinTech ecosystem attracted over €1 billion in total funding and is attracting major international players. Global FinTech Reltio, that has a total funding of $ 237 M according to Crunchbase, has just announced that Lisbon is to be their Tech Hub in Europe.

Global FinTech Reltio, that has a valuation of around EUR 1.7 billion, has crossed the $ 100 million mark in Annual Recurring Revenue (ARR). Reltio just announced that they have selected Portugal as their Tech Hub for the adoption of cloud Master Data Management (MDM) solutions as part of their digital transformation strategies. Reltio Portugal will serve as an EU hub for developing innovation with cloud, big data, and machine learning technology.

According to the Portugal FinTech Report 2022, the total funding from the Portugal FinTech ecosystem, excluding international FinTech companies operating in Portugal, totals € 1,079,745,694. The top Portugal FinTech companies have raised an aggregate of over € 1 billion euros, this figure excluding global FinTech companies operating in Portugal. Funding for blockchain and crypto accounts for a share of 76%, while the lending and credit segment accounts for 12% and the RegTech and cybersecurity segments obtained 6% of funding. On average 48% of companies obtain funding from international investors.

Lisbon and Porto are the main FinTech hubs. According to the Portugal FinTech Report 2022, Portugal is now at a mature stage of the FinTech ecosystem. This is because Portugal is a world class hub for FinTech companies, with the presence of several unicorns.

Portugal created a fast-track to attract FinTech companies to Portugal. The start-up Visa is a program for start-ups as well as companies in a more mature stage. Within a short period of time, seven unicorns emerged in Portugal, attracting the attention of international funds and investors.

Fintech House created an ecosystem where companies from the FinTech, RegTech, InsureTech and Cybersecurity segments in Portugal can easily interact with regulators, banks, investors and other relevant entities. Its new facilities house 80 FinTechs. Fintech House is a FinTech incubator that collaborates with BPI, Fidelidade Seguros, INCM, Morais Leitão, Visa and KPMG in order to provide support to start-ups by connecting them to banks and by fostering growth for globalization.

Thus, collaboration between FinTech segments is now streamlined in Portugal, with mature players creating an ecosystem. It is an environment where start-ups collaborate with larger companies and banks.

In April 2021, Banco de Portugal (BdP) adopted a regulation for companies that provide virtual assets. In Portugal, Bison Bank is the first bank that was authorized to provide virtual assets’ custody through the Bison Digital Assets. The company acts as a bridge between the Traditional Financial segment (TradFi) and the Cryptocurrencies or digital assets segment.

FinTech companies provide a new disruptive technology to enhance traditional financial activities. Visa, being in a privileged position at the core of the payments system, bridges the gap between traditional systems and emerging technologies developed by FinTech companies.

The total value of the entire crypto market is around $1 trillion. Centralized crypto exchanges and established blockchains are not vulnerable to hackers due to enhanced cybersecurity measures. While Decentralized Finance (DeFi) protocols have multiple layers of security, they are lucrative targets for hackers as the market segment has the largest growth in terms of the processed transaction value. Therefore, securing blockchain protocols is the next step of the Web3 process.

The Global Cybersecurity Index 2020 report measures the commitment of 193 countries towards cybersecurity issues. In this report, Portugal ranks 14th for the Global Index and 8th for the European index.

This is attracting major players in the field of cybersecurity and digital sovereignty, such as UBCOM that just opened an office in Portugal. UBCOM is planning rapid growth in 2023 as they expect to reach a turnover of EUR 1 M and to recruit seven engineers on-site.

With the Market in Crypto Assets Regulation (MiCA) coming into force, there are now benchmarks for crypto assets in the EU.

Another evolution includes the Central Bank Digital Currency (CBDC). CBDCs will transform the banking system which currently uses the Swift system. CBDCs will provide digital validation for information that pass-through the banking system and this will lower transaction costs.

China has already started testing CBDCs in a number of cities including Shenzhen, Chengdu and Suzhou. In France, the central bank is working with IBM to use blockchain technology.

Banks are now transforming into Tech companies. In the EMEA region, some banks have well-developed Anti-Money Laundering (AML) and AI systems. Belgian bank KBC now has a subsidiary focused on AI applications that target the prevention of financial crime.

With the MiCA regulation of crypto assets and the move towards Central Bank Digital Currencies, the digital Euro may become a reality by 2026.

Despite falling Tech stocks and concerns about an economic downturn, global FinTech Venture Capital (VC) is seemingly not affected. Companies like Uphold have managed to raise Euros 30.6 M capital with investment from Hard Yaka. Private capital from investment funds have reached an all-time high of $3.6 trillion. Public companies are looking into Mergers and Acquisitions in the FinTech sector that is not showing any sign of a slow-down.

Start-up Pleo raised $200 million in December and chose Portugal for their FinTech hub in Europe. Lisbon is renowned as a hub for FinTech innovation.

The Web Summit, that started in Dublin, was held in Portugal since current Portugal Prime Minister convinced the organizers to move. The move attracted innovative FinTech companies and contributed to the dynamic Tech environment.

Anchorage Digital, Portugal’s first crypto unicorn, raised $350,000,000 last year, and this provided them with a buffer that could sustain many years of downturn.

There is a number of international FinTechs operating in Portugal, such as Arcopay, Sfera, Weavr, Unify Giving, Yapily and many others.

Moreover, there are more than 10 unicorns coming out of Portugal, and the trend is continuing with emerging blockchain companies such as Anchorage, Wallet Connect, Utrust and Consensys Diligence, to name a few.

Global player Reltio, that has a presence in 140 countries, has just announced that they have selected Lisbon for their EU hub. Reltio collaborates with 14 of the Fortune 100 companies and with global companies that include Pfizer, L'Oréal and AstraZeneca, which all rely on the Reltio platform. Reltio and Google Cloud are expanding their partnership to unleash the impact of analytics and data science.

Portugal’s FinTech success story is yet to lead to more major developments in the financial sector with more and more start-ups and global companies joining the dynamic Tech scene. Fitch Ratings have just announced that they have upgraded Portugal’s long-term foreign currency Issuer Default Rating (IDR) to BBB+ and has stated that the outlook is stable. It is a sign of the market confidence and will further strengthen the Portugal FinTech sector as a mature segment with a high-growth potential.



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